Taxmen call on WNS; slap tax demands of about Rs 557 cr

WNS is the latest MNC under I-T department's scanner for on transfer pricing issue.

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Taxmen call on WNS; slap tax demands of about Rs 557 cr

WNS is the latest MNC under I-T department's scanner for on transfer pricing issue.

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After Vodafone , Nokia and Shell, WNS is the latest MNC that has come under the tax scanner on transfer pricing issue and the outsourcing major has demands of additional tax of about Rs 557 crore on income and with regard to acquisition of UK-based Aviva's BPO services.

The company, however, has challenged the I-T notices in courts of law.

The tax demands, which include taxes on income and services, are for financial years from 2003 to 2010, WNS has said in its annual report for 2012-13 fiscal submitted to the US Securities Exchange Commission.

Among India's leading pure-play BPO providers, WNS had a headcount of 25,520 as of March 2013. It has delivery centres across nine countries of Costa Rica, India, the Philippines, Poland, Romania, South Africa, Sri Lanka, the UK and the US.

"We may be required to pay additional taxes in connection with audits by the Indian tax authorities," WNS said in the Annual Report.

"These orders assess additional taxable income that could in the aggregate give rise to an estimated Rs 282.73 crore (USD 52.1 million based on exchange rate on March 31, 2013) in additional taxes, including interest of Rs 102.94 crore (USD 19.0 million)," the company said in the report.

The firm added that "from time to time, we receive orders of assessment from Indian tax authorities assessing additional taxable income on us and/or our subsidiaries in connection with their review of our tax returns. We currently have orders of assessment for fiscal 2003 through fiscal 2010 pending before various appellate authorities."

The company follows April-March financial year. The assessment orders allege that transfer prices applied by WNS to certain of the global transactions between WNS Global, one of its Indian subsidiaries, and other wholly-owned subsidiaries were not on "arm's length terms, disallow a tax holiday benefit claimed by us, deny the set-off of brought forward business losses and unabsorbed depreciation and disallow certain expenses claimed as tax deductible by WNS Global", it added.

Transfer pricing deals with the technique where parent companies sell goods and services to subsidiary entities at an inflated price to deliberately reduce profits and tax liability.

The law requires that goods and services should be sold to subsidiary companies at arm's length price -- the price at which goods are traded between unconnected companies.

Taxing these units has become a complex area for, with the government often disagreeing on the profits declared by a foreign company for its Indian unit.